Broadband Stimulus and the Underserved

Christopher Vein, chief information officer of the city of San Francisco, has some inventive ways to bring high-speed Internet access to areas of the city barely reached by broadband. He's marshaled donated PCs and equipment and tapped excess capacity on the city's fiber-optic network to give inner-city residents a fast connection to the Web and bring state-of-the-art health care to a clinic in one of San Francisco's least privileged neighborhoods. In many ways, Vein is just getting warmed up; he has even bigger plans.

But as outsize as his ambitions may be, Vein won't be in line for one of the government's grandest plans for bringing broadband into underserved parts of the country. At least for now, San Francisco is holding off on applying for a grant under the federal government's $4.7 billion Broadband Technology Opportunities Program, designed to encourage broadband development around the country.

It's not that Vein doesn't want the money, or couldn't put it to good use. But as written, the rules governing the grants are stacked against cities like San Francisco, even though urban areas are among the places least reached by broadband and most in need of efforts like the one under way.

"I don't want to be seen as criticizing the Administration's efforts on the broadband problem around the country," Vein says. "I applaud its efforts. But the rules are written in such a way that it's difficult for a city like San Francisco to meet the requirements." An Aug. 14 deadline for applicants for the first wave of funds was extended by six days after technical glitches snagged the application process.

To qualify for funding, applicants need to prove they're catering to an "underserved" area. Yet the National Telecommunications & Information Administration (NTIA), which is overseeing the program, defines underserved as one where at least half of all households lack broadband, or where fewer than 40% of households subscribe to broadband, or a place where no service provider advertises broadband speeds of at least 3 megabits per second. In a densely populated city like San Francisco, where telecom providers like AT&T (T) and Comcast (CMCSA) widely advertise residential broadband all over the city, it's hard to point to a place that technically meets the "underserved" definition.

Problem Goes Beyond Big Cities Rather than apply for the first batch of grants, Vein is waiting for a later batch of funds in hopes that the rules will be changed by then. Vein is not alone in his beef with the government's broadband program. Cities large and small are having a hard time meeting the application requirements from the NTIA. Many are delaying requests until changes can be made to the rules, says Joanne Hovis, a telecommunications consultant who sits on the board of directors of the National Association of Telecommunications Officers & Advisors (NATOA), an organization that represents chief information officers and chief technology officers in local governments. "It's hard to see how any urban area can qualify for a grant, and that is unfortunate because the most serious needs for broadband access are in urban areas," Hovis says. "Some neighborhoods may indeed be served by commercial operators, but that doesn't mean the service is affordable."

The problem isn't limited to big cities. Take the case of Pulaski, Tenn., a small town of about 8,000 located some 70 miles south of Nashville. In 2007, the local power utility, Pulaski Electric, built its own fiber-optic network to serve homes and local businesses. The service, which has about 1,500 customers, is called Energize and offers 10 megabits per second plus TV and voice calling for $99 per month. Pulaski Electric CEO Wes Kelley says he'd like to expand the service to some 2,500 households in outlying rural communities.

But Pulaski runs afoul of the same "underserved" definition as San Francisco does. A patchwork of local phone, cable, and wireless companies offer varying levels of DSL and fixed wireless services, making it difficult to argue in a grant application that these areas are "underserved," Kelly says, even though some of them have no broadband service at all. "There's a combination of hit-and-miss providers in these communities that made it too complicated, so we decided to sit out the first round and wait," Kelley says.

Monticello, Minn., a city of 12,000 located 41 miles northwest of Minneapolis, is building its own fiber-optic network, paid for by $26 million in voter-approved revenue bonds, that would link not only households in the city itself but another 4,000 people in nearby communities that are part of Monticello's school district. There, too, a hodgepodge of services from telecom providers such as TDS Telecom (TDS) makes it difficult for the city to seek broadband stimulus money. "We thought we'd be able to use that money to extend our network to families who live outside the city whose children attend schools in the district, and put them all on an equal footing," says Jeff O'Neill, city administrator. "We were all disappointed when it became clear that we wouldn't qualify."

Lobbying for a Change in Rules Broadband advocates and city governments have started to lobby the NTIA for a change in the rules. A July 16 letter sent by such groups as NATOA, Consumer Union, and the Media & Democracy Coalition to NTIA Administrator Larry Strickling urged several changes to the rules, chief among them the strict requirement that areas targeted for grants meet the current "underserved" definition. "The definition has the effect of precluding any resident infrastructure program in an area where a minimal level of broadband, even first-generation DSL, is generally available," the letter says.

A spokeswoman for Federal Communications Commission Chairman Julius Genachowski said the FCC isn't commenting on the broadband grant process. Mark Seifert, senior adviser to NTIA director Strickling, says potential applicants should nevertheless file an application and make the best case possible. He says a good way to make the case is for applicants to take surveys among the local population to see what kind of service is available. But the priority, he says, is for bringing broadband to places where it's either not available at all or only marginally available. "We know that this program alone will not achieve the President's goal of broadband for everyone," Seifert says. "We have limited dollars to invest, and we have a directive from Congress and the public record telling us to invest it in areas that are unserved or underserved."

Critics of the NTIA rules are also worried about a provision that allows incumbent telecom carriers to challenge grants in places where they can argue they already offer service. Seifert says that telecom carriers shouldn't take their rights to challenge grant applications lightly. "If an incumbent wants to challenge an application, they will need to demonstrate their claims with data," he says. "We take this program very seriously and will not allow parties to game the system."

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